Driving Factors behind FII Flows – A Literature Review from the Indian Stock Market

This study aims at investigating the driving factors as found and discussed in various relevant studies pushing the FIIs in pouring money to the Indian stock market over the years post-liberalization. All useful studies as available from internet-searching and print-publications dealing with mainly the determinants of FIIs post-liberalization of the Indian stock market have been accounted for under this study. Then, these studies are thoroughly read out to pinpoint the driving factors behind FII flows, other related issues, and overall the limitations of such studies which should be avoided by future ones. This study finds that domestic stock market returns, domestic macroeconomic fundamentals, and India-specific stock market-driven factors have been the most influential determinants amidst contradictions and similarities in empirical studies. However, there is ample scope for future studies to look into the nature and behavior of FIIs with advanced time series techniques such as ARCH methods. Also, the role of international push factors as drivers of FII flows should be studied by future researchers. Thus, this study is of immense help to future researchers, stock market practitioners, investors, and other stakeholders to do literature review and find their required information in regard to determinants of FIIs flows. It is also one of a pioneering nature in the field of literature review in the Indian stock market investigating the drivers behind FII flows.